Competition and Selection
The claim that a business firm must maximize profit if it is to survive serves as an informal statement of the common conclusion of a class of theorems characterizing explicit models of economic selection processes. Such models, by making explicit the strong assumptions needed to generate this sort of result, are the basis for a critique of standard economic theory which relies on competitive equilibrium. Models of Schumpeterian competition, emphasizing the centrality of innovation, plainly provide a much better description of the world we live in than do models of static equilibrium.
KeywordsAdjustment, dynamic vs static Alchian, A. Behavioural change Comparative statics Competition and selection Competitive equilibrium Constant returns to scale Decreasing returns to scale Diminishing returns Entrepreneurial rents Entrepreneurship Evolutionary economics Fixed factors Friedman, M. Increasing returns to scale Innovation Latent productivity Market power Mimicry theorems Natural selection Neoclassical growth theory Patents Present value Profit maximization Research and development Rules of behaviour Satisficing Schumpeter, J. Schumpeterian competition Selection equilibrium Simon, H. Static equilibrium Survival of the fittest Technological opportunity Winter, S. G.
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